Today as the nation goes to the polls to determine whether the United Kingdom should remain a member of the European Union or leave the European Union it’s worth thinking about what has been the impact of this democratic exercise.
Today’s EU referendum has brought along with it considerable political uncertainty, much more than last year’s General Election when the general consensus led by the pollsters was that we were heading for a minority-led administration or a coalition. It’s fair to say that the property industry is not the biggest fan of democracy in action, something that we constantly hear from developers when their project is to be determined by elected councillors. At MPC we believe that good quality consultation and engagement reduces that political risk and ensures delivery of a successful planning outcome.
The very nature of investment and property development needs clarity and certainty. These conditions allow for investment to happen, construction of projects and occupiers to commit.
The uncertainty has led for investors to delay their decision-making and apply a ‘wait-and-see’ approach. That has been the case in central London where investment activity went down against the previous quarter and the same point in 2015 accordingly to Cushman & Wakefield. Much of this decline can be attributed to the decline in overseas investment.
According to City law firm Nabarro, commercial property investors were adding “Brexit clauses” to contracts that will allow them to pull out of deals if the UK votes to leave today. The leap into to the unknown has left a situation where investors are paying deposits that they will get back if leave wins.
Britain’s biggest listed property developer, Land Securities, last month announced that it had sold more than £1bn of its assets because of the growing economic risks to the UK, primarily the chance a vote to leave. They are not alone, many of the UK’s largest property funds such as Legal & General UK Property Aberdeen’s UK Property product have sold buildings order to hold large liquid holdings in the run-up to the referendum on June 23.
If the nation assumes that it wishes to remain in the European Union, there will be a typical immediate ‘bounce back’ as investment and transactions recover. However, the prospect of political uncertainty will remain, especially if the results are as narrow as the polls suggest and a divided Conservative party in government. This continuing political uncertainty will mean that there will be some investment in the UK will be stifled and won’t be part of the ‘bounce back’. This loss of investment and expulsion of hot air by politicians on both sides will be the real cost of this referendum.
Well was this democratic exercise worth it? Well it certainly wasn’t worth it if you don’t vote today. So if you haven’ t already, embrace democracy for once and vote.
This article was written by Associate Director Raj Mandair